How to become a sponsor.
Criteria for approval
A firm wishing to act as a sponsor must obtain our approval. The approval criteria are set out in LR8.6.5R. An applicant must:
- be an authorised person or a member of a designated professional body
- be competent to provide sponsor services in accordance with Listing Rule 8 (LR 8)
- have appropriate systems and controls in place to carry out its role as a sponsor in accordance with LR 8
Making an initial application
If you think you meet the criteria for approval as a sponsor, as set out above (and in LR 8.6.5R), we recommend that you first call the Sponsor Supervision Team to discuss your proposed application.
Following this call, we may suggest that you write to the Sponsor Supervision Team, Primary Market Oversight Department at the Financial Conduct Authority’s address, providing the name of a designated contact and outlining:
- Your business model, with an indication of the nature and number of intended sponsor transactions you expect to undertake each year.
- The composition and experience of your proposed sponsor team and details of their sponsor experience (including details of such experience and transaction history) and how the team meets our competence requirements set out in LR 8.6.7R – LR 8.6.9BG. This should include details of how you satisfy the requirement that you have submitted a sponsor declaration to the FCA within three years of the date of your application. In order for a sponsor applicant to meet this requirement, the FCA may consider whether any of your proposed sponsor team have had material involvement in the provision of sponsor services that have required the submission of a sponsor declaration within the previous three years (LR 8.6.7AG).
- Details of your proposed Key Contacts as per LR 8.6.7R(2)(c).
- Your organisational structure.
- Your firm’s compliance arrangements, which should demonstrate that you have in place appropriate systems and controls in the areas set out in LR 8.6.12R.
Applicants may find it helpful to refer to our two technical notes we have issued which give guidance on the competence requirements set out under LR 8.6.7R to LR 8.6.9BG (Technical Note 715.1) and LR 8.6.7R(2)(b) (Technical Note 714.2).
The formal application process
Once we receive your submission, we will give you our initial assessment of whether your application is likely to meet the sponsor approval criteria. If our initial assessment is positive, we will then invite you to submit a formal application.
As part of the approval process, we are likely to request additional information to support the application. In addition, our Sponsor Supervision team staff will carry out an onsite visit and conduct a review of your systems and controls, review recent transaction files and conduct interviews with senior management. The review will focus on how the firm is likely to perform the sponsor role and the experience, skillset and expertise of your proposed sponsor staff. We will seek to satisfy ourselves that the applicant, if approved, is likely to meet our competence requirements.
As the application process is iterative, it may take several months to complete. This can include the firm making multiple written submissions to us, or having calls and meetings with us. During this time, as a result of the close contact we maintain, we build up a clearer picture of the firm so as to satisfy ourselves that the firm meets our approval requirements. We therefore recommend that you contact us at an early stage to discuss the likely timescale.
Once approved as a sponsor, firms need to comply with LR 8 which imposes a number of positive duties on sponsors. They must comply with the criteria for approval as a sponsor on an ongoing basis (LR 8.6.6R) and have an obligation to notify the FCA in a number of situations (LR 8.3.5AR and LR 8.7.8R). For further information on sponsor notifications see our Technical Note 711.1.
Restrictions, limitations and suspensions of sponsor services
It should be noted that sponsors can be approved with a limitation or restriction both at the time of a sponsor’s approval (LR 8.6.5AR) or at any time thereafter (LR 8.7.2AR).
The ability to restrict or limit sponsor services adds flexibility to the sponsor regime by allowing us to approve a new applicant or maintain a sponsor’s approval where previously it might not have met the sponsor approval criteria under LR 8.6.5R.
For example, where we consider that a new applicant or sponsor does not have the relevant experience or appropriate systems and controls to provide the complete range of sponsor services it wishes to undertake, rather than refusing a sponsor application or seeking a sponsor’s cancellation, we can limit or restrict the scope of sponsor services that it provides. In this way, we ensure that the sponsor can provide services to issuers only in the areas where the sponsor is competent.
Where a sponsor is unable to meet the sponsor approval criteria, it may request a cancellation of its approval.
Where a sponsor considers that the inability to meet the criteria is temporary, given the irrevocable nature of a cancellation and the associated administrative and financial costs of re-applying for approval, it may prefer to request a suspension of its approval instead. This may provide the sponsor with the necessary time to take remedial action to ensure that it can comply with the sponsor approval criteria in the future.
For further information about this see our Technical Note 712.2.
Sponsor application in the event of a change of legal entity
Where there is a change of control of the sponsor or any restructuring of the sponsor’s group that will result in sponsor services being provided by a different legal entity, but where will be no change in either the employees or the systems and controls, an abridged approval process will be undertaken.
Typically, it will not be necessary for us to conduct an onsite visit, but the new applicant will be required to give us certain assurances that there is no change in either its sponsor employees or systems and controls. The sponsor should submit a cancellation request in relation to the relevant entity pursuant to LR 8.7.22R. The entity that is then intended to provide the sponsor services should apply for approval as a sponsor pursuant to LR 8.6.2R before it provides any sponsor services.
It is important that there is no period of time whereby a live sponsor transaction is without an approved sponsor and therefore, the cancellation and approval process must be managed by the sponsor in order to ensure this does not occur.
Where a sponsor is contemplating a restructuring which may result in the transfer of the sponsor approval to a new group legal entity, it should contact us at an early stage in order for us to provide guidance and obtain the relevant assurances in a timely fashion.